CHICAGO--(BUSINESS WIRE)--The Federal Reserve today reported corporate cash is still hovering at
record high levels of $1.84 trillion – almost identical to last quarter.
However, cash remains 29% higher than it was just 18 months ago. These
cash levels are a rational response to challenging economic
circumstances according to Treasury Strategies, a global treasury
consultancy, which issued a report earlier this week.

“With so much cash currently sitting in corporate coffers, executives
are under intense pressure to put that cash back to work in the
marketplace. There have been charges of hoarding and accusations that
these record cash levels are prolonging the recession,” says Cathy
Gregg, Partner of Treasury Strategies.

Treasury Strategies worked with over 300 corporate clients to understand
the underlying business decisions leading to these cash levels.

“Looking below the surface, 39% of corporations told Treasury Strategies
they increased cash and 23% actually decreased over the last six
months,” says Anthony Carfang, Partner of Treasury Strategies.
“Projections for the next six months show the gap narrows to 30%
increasing and 23% decreasing. The reasons for these changes vary
widely.”

Companies that increased cash overwhelmingly noted cash from operations
and decreased inventories as the driving factors. Conversely, negative
cash flow from operations was the primary driver for 54% of companies
with decreased cash levels.

“Our clients told us that increased cash levels are the result of
improvements in day-to-day operations and independent decisions about
capital structures and operations made for the good of each individual
company,” notes Gregg. “This highlights their rational management
through tough economic times.”

Perhaps the most interesting finding is among those companies expecting
cash to decline, 47% are planning capital expenditures and 34% plan
acquisitions as the primary uses of their cash.

“Today’s Fed report presented a good news – bad news picture. On the
positive side, total corporate borrowing increased by $50.4 billion
during the second quarter. The bad news for the U.S. economy is that the
increase is more than offset by the $75.5 billion in new direct
investment abroad,” adds Carfang.

“There was no evidence, whatsoever, of hoarding or a coordinated capital
strike. Rather, companies were making rational individual decisions
regarding inventories, capital expenditures, borrowing, debt repayment,
acquisitions and dividends within the context of their operating cash
flows,” says Gregg.

Treasury Strategies, Inc. is the leading Treasury consulting firm
working with corporations and financial services providers. Our
experience and thought leadership in treasury management, working
capital management, liquidity and payments, combined with our
comprehensive view of the market, rewards you with a unique perspective,
unparalleled insights and actionable solutions. For more information,
please visit www.TreasuryStrategies.com.